Pacific gets ‘record’ share of Australia’s static foreign aid budget

Competition with China in the Pacific is shaping how Australia allocates development assistance.
Stephen Wright
Pacific gets ‘record’ share of Australia’s static foreign aid budget An Australian Army CH-47 Chinook helicopter delivers aid to Futuna Island in Vanuatu on Mar. 21, 2023 following destructive cyclones.
Daniel Goodman/Australian Department of Defence

Pacific island countries are getting an increased share of Australian foreign aid, budget documents show, as it shifts into funding infrastructure such as undersea cables and ports in response to China’s inroads in the region.

Overall, Australia’s foreign aid budget is flat and it remains one of the least generous donors in the OECD club of wealthy nations, ranking 26th out of 31 countries. The increased focus on infrastructure also means that proportionately less of the aid budget will be spent on health.

In the Pacific, the largest aid increases in Australia’s 2024-2025 government budget are directed at Fiji, where Australia will help fund a port upgrade, and Tuvalu. The atoll nation of 12,000 people last year ceded a partial veto of its foreign policy and security relationships to Australia under the Falepili Union agreement.

“If we look at this reduction in health - is this because our partners have told us they’re not that interested in health - I don’t think so,” said Stephen Howes, director of the Australian National University’s Development Policy Center.

“If we’re going to go into Fiji and tell them we are using our aid to help them expand their port, that’s because we don’t want China to do it, and that’s going to mean less funding for health,” he said at a panel Wednesday on the budget’s aid component.

China’s government has courted Pacific island nations for several decades as it seeks to isolate Taiwan diplomatically, gain allies in international institutions and erode U.S. military dominance. 

Its inroads with Pacific island nations, including a security pact with the Solomon Islands in 2022, have galvanized renewed U.S. attention to the region.

The budget released Tuesday shows the government has allocated A$4.96 billion [US$3.29 billion] to aid, an increase of 4.0% from the previous year.

“Australia is delivering a record $2 billion in development assistance to the Pacific, maintaining Australia's position as the region's largest and most comprehensive development partner,” the budget papers said.

In real terms, the spending is flat at 0.19% of Australia’s national income, according to the Australian Council for International Development, and less than half of its level in the 1980s.

“This budget provided the government with an opportunity to show real humanitarian leadership in responding to human suffering across the world,” the council said in a statement. 

“Australians see what is happening on their screens in all corners of the globe and expect their government to do more. This budget barely touches the surface,” it said.

Howes said the budget documents project aid spending to be unchanged for the next decade and beyond.

Pacific island countries now account for more than 40% of the aid budget, almost doubling from a decade earlier, at least partly reflecting government concerns about China’s role in a region that Australia has regarded as its sphere of influence.

Australia remains the single largest donor to Pacific island countries despite China’s enlarged presence in the region. At least a fifth of the Australian aid budget is spent on what Australia calls governance programs that aim to bolster democracy, anti-corruption efforts and transparency of public institutions.

For Tuvalu, Australia will provide additional funds for its land reclamation projects that aim to protect against king tides and projected sea-level rise and also contribute the lion’s share of the country’s first undersea telecommunications cable.

Tuvalu, one of the dwindling number of nations that have diplomatic relations with Taiwan, last year signed a treaty with Australia that requires it to have Australia’s agreement for “any partnership, arrangement or engagement with any other state or entity on security and defence-related matters.”

In Fiji, Australia is providing budget support to the government as the tourism-dependent economy continues to recover from the COVID-19 pandemic. It also is supporting an upgrade to Fiji’s largest bulk cargo port and its shipbuilding industry. 

Papua New Guinea, with its estimated 12 million people, remains the single largest recipient of Australian aid in the Pacific at A$637.4 million. The Solomon Islands, where Australia has a security force stationed after riots in 2021, is the second largest with A$171.2 million.

The budget documents also revealed that Australia’s government agreed in December to provide an A$600 million loan to Papua New Guinea, a day after the two countries signed a defense cooperation agreement.


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